Bankruptcy Judge Disregards Terms In Sale Leaseback Docs In Home Sale; Recharacterized Equity Stripping F'closure Rescue Scam As An Equitable Mortgage

In a recent court ruling in favor of a homeowner/couple who were awarded a total of at least $690,000 for multiple violations of Federal and state law after being screwed over by a foreclosure rescue operator in a sale leaseback, equity stripping scam, a New Jersey bankruptcy court found that the transaction among the laws violated were the Federal Truth In Lending Act ("TILA") as amended by the Home Ownership and Equity Protection Act ("HOEPA") as well as the New Jersey Home Ownership Security Act of 2002 ("HOSA"), all of which regulate the origination of home loans.

In order for TILA, HOEPA or HOSA to apply, the homeowners first had to establish that the sale leaseback transaction constituted consumer credit. They attempted to do so by setting out to recharacterize the transaction as an equitable mortgage.

For the court's considerations in applying the law in recharacterizing the transaction as an equitable mortgage (which ultimately resulted in a monetary award to the homeowners for violations of TILA, HOEPA and HOSA that totaled at least $293,836.17), see New Jersey Sale Leaseback Of Home In Foreclosure Recharacterized As An Equitable Mortgage.